National Income
Uploaded by nkagogoda on Aug 31, 2007
Macroeconomics deals with a number of large totals or aggregates which are used to conceptualise and measure key components of the economy. The most fundamental of these is the total output of goods and services, conventionally referred to as the national income.
Domestic income" is that produced within a country by all producers operating there, whether foreign or not.".National income" is that produced only by "nationals" of that country, whether they are producing it there or elsewhere.)
It is generally used as an indicator of the economy’s performa. Because a larger output or income is equated with a rise in the economic well-being of a country’s population, a higher output or income is considered desirable and a lower one undesirable.The economy’s overall performance is tracked by the changing value of the total output or income statistic.
Comparisons of relative well-being among different countries are based on these statistics and a host of political and social as well as economic implications flow from their behaviour over time.
#Measuring Total Output by the Expenditure Approach
Measuring total output by the expenditure method involves breaking down total spending on all goods and services produced into four categories: spending done by consumers on goods and services (abbreviated simply to the letter C); spending done by businesses on capital goods (total investment spending, I); spending by governments on goods and services, G); and net exports (the total value of exports minus the total value of imports, X-M). Because all spending done in the country falls into one or other of these four categories, we can say that total expenditure is the sum of C+I+G+(X-M). We now examine each of these four main components of total spending.
Consumption spending is the total of all outlays made by households on final goods and services.C also excludes purchases of second-hand goods that were produced in some earlier accounting period so as not to double count the value of such output.